In this clip from "The High Energy Show" on Motley Fool Live, recorded on Feb. 8, Motley Fool contributors Travis Hoium, Jason Hall, and Zane Fracek talk about why investors should seek companies that have some degree of differentiation and why they should consider taking a basket approach.


Travis Hoium: Another question here that I think is really important is, "How can investors avoid mistakes in renewable energy?" I'll start off on that. I think the two things that I focus on now more than ever after learning from a lot of mistakes over the last decade, decade and a half, is find companies that are predictable and reliable, and differentiated in some way that is sustainable long-term. That's really hard to define. But if you're going to try to get into something like component manufacturing, even project development, you have to figure out how is a company differentiating itself. Over the last 10 years, I think it's been really hard, specifically in the solar panel manufacturing and inverter space, to differentiate yourself when there's 50 companies. Like Jason said, a lot of them funded by Chinese banks, just given a blank check of a billion dollars to go build manufacturing. What's changed in the last few years is that there has been a ton of consolidation. What I'm hesitantly saying is that I think we're starting to see the industry reach a level of maturity that we might be able to expect more steady earnings. That doesn't necessarily mean it's going to be steady, but I think we're not going to see these companies explode and then literally go out of business the way that we did in 2013, 2014. But that being said, my strategy is buy a basket of companies that you think have some differentiation because you're going to be wrong on at least one of those.

Jason Hall: Two things to say, and then Zane I want to hear where you're approaching this as a newer investor. I think that can really add some value to this. Travis, you took my first bullet right out of my mouth. Take a basket approach. I think you have to start there. Then, the second thing is, I think unit economics matter more than the best technology. That's so important, especially on the manufacturing side. That's been proven. We have seen that. You can have the best technology, but if the unit economics don't matter, don't work, because at the end of the day, this is a commodity decision. Buyers are buying it based on an expectation of getting an economic return based on how much power it can produce and that they can sell, or how much power costs they can take off of their business by bringing the production in-house. Economics are the most important thing in buying that basket. Zane?

Zane Fracek: I look at it a little bit differently. I don't invest for dividends, first off, and I also don't care as much of the business is stable. That could be just because I am looking all upside really like I'm at a point in my life where if it goes to zero, it is what it is. I also would take a basket approach. I agree with that. But I also probably concentrate a little bit more in a couple of ideas. We'll probably touch on them a little bit down the line. But Travis, I like your point about differentiation. I think the companies that we'll talk about later play into that, but it's hard to find for sure.